[Chumley]

Anyone know the steps you have go through for a Canadian to get taxed winnings in the U.S. back?
I have been surfing some of the companies that will do it for you, but they all charge a pretty high fee to do it.
I tried the IRS website but I couldn't find any clear guide and then talked to a rep on the phone, but they just referred me back to the online website.

[DonHowson]

I'm a tax preparer in Texas.

I have never seen federal taxes withheld, but often state taxes are, when winnings are over $1200. (That might not be a magic number, it just always seems to be that amount or higher.) So in most cases it would be the state and not the IRS that you would have to deal with.

I've been down here for 14 years so it has been a while since I have done a Canadian return. But there is a foreign tax credit which may apply to casino winnings.

I found this reference, which may help:

http://www.taxtips.ca/filing/foreigntaxcredit.htm

I have not read this exhaustively, but it applies to non-business taxes. It doesn't exclude casino winnings, so one would think that the credit would apply.

Cheers. .../don

[BartSimpson]

The IRS witholds taxes from significant winnings and if you're a foreigner then I wish you luck getting the money back because in the USA casino winnings are taxed at the capital gains rate and then the full amount is also subject to Federal income tax and applicable local taxes.

[DonHowson]

BartSimpson wrote:

The IRS witholds taxes from significant winnings and if you're a foreigner then I wish you luck getting the money back because in the USA casino winnings are taxed at the capital gains rate and then the full amount is also subject to Federal income tax and applicable local taxes.

No, they are not taxed at the cap gains rate. It is included as ordinary income on line 21 of your return. You can deduct losses up to the amount of your winnings on Sched A. We always take the max deduction, so for the average person, the winnings aren't taxable. If you can show that gambling is your primary source of income - your profession - you can claim all losses and expenses on Sched C.

.../don

[BartSimpson]

And if you're in a higher tax bracket you get nailed with the 15% capital gains tax and when your winnings push you into that bracket the 15% is witheld in addition to the 25% to 28% that is typically withheld.

[DonHowson]

BartSimpson wrote:

And if you're in a higher tax bracket you get nailed with the 15% capital gains tax and when your winnings push you into that bracket the 15% is witheld in addition to the 25% to 28% that is typically withheld.

Sorry, but there is no capital gains on casino winnings. It is treated as ordinary income. The amount withheld and the amount of tax paid are two different things. The state usually withholds 10%. If you are not a resident in that state you can file a non-resident return and get most or all of it back. But for visitors, you likely can get a deduction or credit for foreign taxes. Probably easier than filing a non-resident state return.

Withholding is based on the size of the winnings. The casino doesn't know what tax bracket you are in, so they can't increase withholding based on your tax bracket. You pay tax based on your total income, net of gambling losses.

.../don